n Stellenbosch Law Review = Stellenbosch Regstydskrif - Tainted elements or nugatory directive? The role of the general anti-avoidance provisions ("GAAR") in fiscal interpretation




A number of commentators in South Africa have been critical of a key aspect of the relatively new General Anti-Avoidance Rule ("GAAR") (Part IIA of Chapter III of the Income Tax Act 58 of 1962) suggesting that section 80A(c)(ii), in particular, is not necessary in light of existing common-law approaches to statutory interpretation. The role of section 80A(a)(ii) is equally uncertain in light of these commentators' arguments. The broader question examined in this article is: "What can these provisions achieve that is not already adequately facilitated by the existing common law?" In turn the article considers whether these common-law principles are sufficient to combat tax avoidance and whether these provisions seek to achieve a goal that is beyond that provided by these common-law principles?

In answering the first question the analysis highlights the comparatively limited scope of these common-law principles. It is concluded that because of, , the limited scope of these common-law principles they are not sufficient to combat tax avoidance. Further, in the taxation context the role of these common-law principles has been significantly impacted upon by the principle. In regard to the second research question, from the analysis it becomes clear that the statutory provisions have a wider operation than the common-law principles. Notably the statutory provisions are not premised on the prerequisites that are required to enliven the application of the subject common-law principles. Specifically, it is contended that legislative direction to have regard to the existence or absence of commercial substance (section 80A(a)(ii)) that includes a focus on individual steps that are part of a broader arrangement that lack commercial substance (section 80C(2) (a) and (b)(iii)) will make a positive contribution combating tax avoidance in South Africa.


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